Everyone has experienced a financial difficulty at one time
or another. Maybe you lost your job, had an unexpected medial issue or
expensive repairs on your vehicle. Regardless of the situation, few people can
say that they have never had a month where they had to choose between bills. If
you have experienced financial difficulty and were forced to miss a car
payment, it doesn’t have to mean that you lose your car. Contrary to popular
belief, no one wins in repossession. Studies from agencies like American Financial Services Association and Experian Automotive have estimated an
average $8,000 loss to dealerships per repossession. The loan customer loses
their vehicle and the dealership ends up having to try to re-sell … frequently at
a loss. Dealerships want you to make your payments, close your loan, and
hopefully come back next time you need a vehicle. On average, an American will
purchase twelve vehicles in their lifetime. Loan companies and dealerships
would love for you to make all of those purchases with them, and repossessions
only sever the customer relationship.
Your missed payment does not have to end in repossession. Auto lenders
and dealerships are likely to work with you if you have a financial difficulty.
Communication is paramount when dealing with your lender. Here are some tips to
avoid losing your vehicle and defaulting on your loan.
1. Ask For A Payment Extension - If you have a situation that
is going to impact your ability to pay, call your lender immediately. Dealerships and financial lenders will be
much more likely to work with you if you communicate your situation as soon as
possible. Be honest. If this is not a situation where one-time payment
forgiveness will get you back on track, let them know so you can utilize other
long-term options that may be available. If it is a temporary situation, ask
for a payment extension. This will give you a few extra days to make your
payment and get back on track.
2. Make an Agreement for
Partial Payment – A partial payment can be a sign of good faith to the lender
or dealership. Pay what you can and make an agreement to pay the rest on a
specific date. Your lender may even waive any late fee if they have partial
payment and an agreement for the remaining amount.
3. Ask Your Lender to Change Your Due Date – Sometimes loan
customers have changes in the way money flows in to the household. Maybe you
got a new job and get paid on different days than you did when you started the
loan. Maybe you have other bills that are near your car payment date and
stretching the money isn’t working. Some lenders and dealerships will agree to
change your payment date, disbursing payments more evenly throughout the month
for you and making them easier to pay.
4. Ask about Deferred Payments - Are you always just one
payment behind? Maybe you got behind a few months ago and haven’t been able to
catch up. Some lenders will allow you to defer a payment, effectively allowing
you to skip a payment and add it to the end of the loan.
5. Ask for Loan Modification – If your problem is serious or
you are anticipating long-term financial trouble, your lender may agree to a
modification of the terms. By extending your 24 month contract to a 36 month
contract, you could lower your monthly installment payment significantly. You
will likely pay additional interest by extending the loan, but it could prevent
default and allow you to get back on track.
6. Refinance Your Loan – Depending on your contract and lender,
you may be able to completely refinance.
Especially if you communicated with your lender prior to missing
payments, you may be eligible for a lower interest rate and better terms. Ask
your lender if they offer a refinancing program.
7. Trade-In or Sell the Vehicle – If all negotiation tactics
fail with your lender or you simply can’t afford the vehicle anymore regardless
of how significantly the loan is modified, trading in your vehicle could
prevent costly damage to your credit or losing all equity you may have in the
vehicle. Dealerships like ours will buy your car even if you have a current
loan balance. You can either sell the vehicle outright or use the equity on
your next, more affordable vehicle.
Repossessions
are negative for everyone involved. Communication with your lender can help you
avoid disaster. Lenders like us want you to make your payments, close your loan
and come back and buy another vehicle when the time comes. The worst thing you can do is nothing, and
the worst thing your lender can say is “no”. Most lenders will be willing to
work with you to keep you in the contract. If you are in a situation where you
can no longer afford your current vehicle, use our
trade appraisal form to get an offer on your vehicle. We will buy your car,
even if you’re not buying from us. If you’re looking to get a more affordable
vehicle, check out our inventory. We have many cars,trucks and SUVs and will
give you the highest trade value possible.
